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  • Drones:About Robolution Capital

    Robolution Capital is the first private equity fund dedicated to service robotics in the world. Robolution Capital'smission is to invest in innovative companies of the fast growing service robotics market, mainly within Europe.Robolution Capital is managed by Orkos Capital, an experienced and well known private equity managementcompany.

    Robolution Capital aims to invest in professional and personal service robotics companies (including integratedproducts, hardware, software, components, services, smart products, etc.) from seed to expansion capital runby outstanding entrepreneurs. The Robolution Capital team intends to play a major role in propelling the servicerobotics industry forward, through its expertise and its wide-ranging connections provided to the investeecompanies, for the benefit of their development.

    Market Overview

  • 2014, Robolution Capital, All rights reserved. 2

    IntroductionThe aerospace industry is experiencing a new revolution with the recent development of drones.

    Also known as Unmanned Aerial Systems (UAS), these aircraft without a human pilot aboard

    can be controlled either autonomously or by a remote pilot from a distant location.

    Originally developed by the defense industry, and deployed in the military context for several

    decades for purposes of monitoring or combat, drones are now able to offer a wide range of

    possibilities for the benefit of society, ranging from environmental control, security, as well as a

    fascinating variety of commercial and consumer services. The combination of their greater

    flexibility, stronger efficiency, and lower costs allows unmanned aircraft to be a transformative

    technology in fields as diverse as urban infrastructure management, farming, and oil and gas

    exploration for example. They can perform air operations that manned aviation can hardly do,

    with evident economic savings and environmental benefits while reducing the risk to human life.

    Table of ContentsPresentation .................................................. 3

    Market Opportunity ......................... 4

    Regulation ...................................................... 5

    Applications ................................................ 7

    Market Stakeholders ........................ 8

    Selected Company Profiles .... 9

    Investment Activity ........................... 13

    About Robolution Capital ...... 14

  • 2014, Robolution Capital, All rights reserved. 3

    A drone can be defined as an aerial vehiclethat does not carry a human operator. Thisunmanned aircraft that can fly autonomouslyor be piloted remotely uses aerodynamicforces to provide vehicle lift. It can beexpendable or recoverable, and it can carry apayload.

    Most of drones are comparable to aircraftexcept that their shape is constrained by theneed to house a pilot: combinations ofaerodynamic propulsion formulas thus beinglarger. The shape of a drone is determined bythe nature and the profile of its mission.Therefore, any task can be accomplished witha dedicated solution.

    Components of a drone fulfill the samefunctions as on a plane: The airframe houses the payload, the

    engine and the monitoring system as wellas the fuel/battery.

    Lift can be provided by a fixed wing likeairplanes or a rotary wing as on helicopters.The latter is chosen for specific tasksrequiring hovering flights (inspection oflarge structures for instance) and a flexiblehandle.

    The engine also depends on the missionassigned to the drone: it is determined bythe size of the machine (and its weight),the altitude and the duration of its mission.Drone can thus be powered by pistonengines with or without turbocharger

    turbines, propellers, jet engines or electricmotors.

    Monitoring systems are essential because theyprovide drones with automatic piloting andnavigation. They can operate completelyindependently or according to orders issuedfrom the ground by an operator responsiblefor conducting the mission. These systemscontrol several devices and components:sensors, calculators, memory and actuators.That is why they belong to the service roboticsproduct family.

    The payload is one of the key components ofthe drone system. Indeed, it is the elementthat achieves the mission. Often placed belowthe structure, it consists of a set of equipmentthat can perform three essential functions: Data acquisition by sensors Data processing by calculators Selection of "useful" information to be

    transmitted towards the ground

    All these data can also be recorded on boardfor delayed transmission or subsequentoperation. A system for transmitting databetween the drone and the ground carriesboth orders from the ground and informationsent by the drone. This transmission can beperformed by telecommunication or opticalsystems over short distances (up to 150 km)or by using a relay (a satellite or anotherairborne vehicle).

    Presentation

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    Market OpportunityThe precise scale of potentialdrone market is very difficultto predict. Nevertheless,according to Teal Group's2013 market study, thecurrent worldwide spendingon drones is $6.6 billion peryear and is estimated tonearly double to $11.4 billionover the next ten years. Themarket value of UAVs willaccount for $89 billionworldwide over the sameperiod. Currently, there areclose to 2,000 differentdrones referenced in theworld, of which more than500 in Europe, beingproduced by about 500manufacturers.

    In France, an initial regulationhas led to an increase of thenumber of approvedoperators from 86 inDecember 2012 to more than400 in February 2014.

    Nevertheless, total revenuesof French dronemanufacturers and operatorsdid not exceed 100 millionin 2013, according to Xerfiestimates. The Frenchcompetitive landscape ischaracteristic of an emergingmarket as illustrated by themyriad of start-up that hasseized the opportunity of thisgrowing market. Of course,some of them have metsuccess, but the competitionis tough: the giants of theaviation industry, such asAirbus, or consumerelectronics, such as Parrot,also want their share of thecake. Similar market growthhas been seen in otherEuropean countries such asGermany, Sweden andSwitzerland.

    Based on the 2013 TealGroups analyses (soon to be

    updated), civil applicationsrepresent 12% of total usestoday and are predicted toreach 30% of the globalmarket in 2030.

    Lower prices combined withan increased robustness anda new regulation should allowthe use of these new flyingmachines by mass marketconsumers. Photography,video and entertainmentshould be the firstapplications covered by thesenew types of B2C drones.

    As a consequence of thepromising development of thedrone business, the market ofpayloads is also expected todouble in the next ten years,from $2.3 billion in 2013 to$4.6 billion in 2022,according to Teal Group.

    2014, Robolution Capital, All rights reserved.

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    Currently, the expansion ofthe drone market is inhibitedby the absence of anadequate regulatoryframework in most countriesand the need to obtainindividual authorizationsfrom each country wheremanufacturers would like tosell or where providers wouldlike to operate.

    The development of dronesfor civil applications requiresensuring that none of themcould represent a threat tocitizens privacy or physicalintegrity. However, regulationis about to change with theappearance of the first lawsauthorizing the developmentof drones in civil airspace.

    Some countries haveadopted legislation forsimple operations by lightdrones to avoid this case-by-case authorizationprocess. In France, theDGAC has published a firstdecree in April 2012. In theUSA, the first regulationshave been implemented inMay 2012 and a flightauthorization for all types ofdevices should be voted by2015. Canada, Australia andBrazil preceded this trend byadopting favorableregulations some yearsbefore.

    In December 2013, theEuropean Council asked theEuropean Commission todevelop a framework for thesafe integration of dronesinto civil airspace as from2016.

    Regulation

    2014, Robolution Capital, All rights reserved.

  • 2014, Robolution Capital, All rights reserved.

    A&B C D E F G

    6

    The French Example

    In France, the use of drones is regulated bytwo Ministerial decrees from April 11th 2012. The first one concerns the manufacture of

    drones, the conditions of their use and therequested capabilities of people who pilotthem.

    The second text focuses on the use ofairspace by drones. Today, one of themain concerns about the use of drones isthe need to share their flight space withaircraft.

    To ensure a more harmonious cohabitation,the DGAC (Directorate General of CivilAviation) has also provided four scenarios.They mainly depend on the type of flight(direct view or out of sight of the pilot) andthe overflight site (non-populated area oragglomeration). These scenarios imply themaximum weight of authorized drones (up to25 pounds), the distance between the pilotand the vehicle and the maximum altitude ofthe latter. If drones or conditions of use donot fit in these criteria, operators need aspecial permit from the Civil Aviation.

    For these air standards for UAVs, the DGAC classified drones into 7 categories (A to G) by weight:

    Model aircraft (with size limitations for Cat. A)

    Tethered unmanned aircraft that are not model aircraft

    Unmanned aircraft (excl. cat A,B,C) with a weight

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    Drones are very useful when human presenceon board does not provide any added value orin case of very high danger. Their operatingflexibility and efficiency allow them to accesssites in the best c